Japanese banks line up behind SoftBank

AtsukoFukase

TOKYO--Flush with cash, Japanese banks are preparing to line up extra financing for SoftBank Corp. (9984.TO) in case the telecom firm wants to raise its offer for Sprint Nextel Corp.
S, -2.05%
and block a rival bid by Dish Network Corp.
DISH, -2.72%

One of the banks said it is ready to provide SoftBank with an additional loan of up to Y200 billion, or $2 billion, one person close to talks between SoftBank and its lenders said. Other executives at Japanese banks, who asked not to be identified, also expressed a willingness to lend to SoftBank if the company asked.

Following Dish's surprise $25.5 billion bid for the No. 3 U.S. wireless carrier on Monday last week, SoftBank and its lenders have been discussing various options in response, said the person.

So far, SoftBank's billionaire founder Masayoshi Son has not asked bankers to line up extra funds, the person said.

On Thursday, SoftBank stood by its past comments that it believes its offer gives superior short and long term benefits to what it called Dish's "highly conditional preliminary proposal," a spokesman said. The company now awaits regulatory approval for the deal to close on July 1, he said. Sprint said it has set up a committee to evaluate Dish's offer.

"SoftBank has the finances to raise its bid without the banks' help," but SoftBank's main bankers wanted Mr. Son to know that they would support a bigger offer, said the person close to the talks, who declined to be identified, as the talks are confidential.

Dish's offer last Monday has thrown a wrench into the Japanese company's plan to buy Sprint. Some of Sprint's shareholders have said Dish's offer is more attractive, raising expectations that SoftBank will be compelled to raise its own offer and usher in a bidding war.

SoftBank, the third-largest mobile carrier in Japan's saturated market, longs for a toehold in the U.S. Its October proposal to buy 70% of Sprint for $20.1 billion planted SoftBank firmly on the global stage amid a jockeying for position among the world's biggest telecom firms in a consolidating industry headed by Verizon Communications Inc.
VZ, -0.51%
and AT&T Inc.
T, -1.14%

In response to the Softbank-Sprint deal, Dish offered to pay $4.76 in cash and about $2.24 in Dish stock. The idea is that by joining Dish's radio spectrum with Sprint's spectrum, the two would be able to offer consumers access to a wide range of entertainment at home and on the road via wireless broadband and satellite broadcast.

One reason people believe SoftBank will raise its bid is the cheapness of money in Japan.

Interest rates are at record-low levels following more than a decade of ultra-easy monetary policies. That allows SoftBank to reach deep to help turn around Sprint, which has consistently ranked a distant third to its bigger rivals. In October, banks, struggling with a lack of demand at home for loans, went so far as to ask SoftBank to take on more loans to finance the Sprint deal. In the end, Mr. Son snagged an interest rate of 1% to 2% for his bridge loan for the Sprint acquisition.

But Mr. Son has promised investors that SoftBank will not leverage the company as heavily as it did in 2006 when it bought Vodafone Group PLC's
VOD, -0.77%
Japan operations for Y1.75 trillion.

Heavily indebted SoftBank's credit ratings are already under review for a possible cut to junk territory. Standard & Poor's and Moody's Investors Service cite concern that the Sprint acquisition may weaken the company's finances. A one-notch downgrade by Moody's would bring SoftBank to a speculative, or junk, rating.

Moody's has also placed Dish on review for a downgrade following its bid to buy Sprint. Moody's now rates Dish at Ba2, or two notches into junk.

SoftBank on Friday raised the upper limit of a foreign bond issue in dollars and euros to help pay for Sprint by $1 billion to $3 billion, citing high demand for the dual tranche bonds.

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